Audit Report Lag: A Study of the Bangladeshi Listed Companies

Abstract

Financial statements are prepared to provide useful information in making business and economic decisions. This information is important for users, especially investors as they use the statements to assess financial condition and performance of the related companies. However, this information is only useful when it is up to date and can be retrieved by investors on timely basis. It is contended that, when the time taken to produce the audit report increased, the usefulness of the information disclosed in company annual reports would decline. The delay in the production of audited financial statements not only affects the usefulness of the information but also the relevancy and reliability of the documents. Despite the importance of timely release of financial information, little has been done to investigate the cause of audit report lag–that is, the main reason of financial reporting delay, especially in developing countries like Bangladesh. Thus, the main purpose of this study is to identify factors that affect the timeliness of audit reports of the Bangladeshi listed companies. Based on a sample of 87 listed companies, the results of the study indicate that the time taken to conclude the audit work is around 101 days. The shortest is 14 days, while the longest is 272 days. The multivariate results show that type of auditor, financial company, profitability and company size significantly reduced the time taken to prepare audit report. On the other hand, type of audit report and leverage significantly increase the time taken to conclude the audit work.

Keywords: Audit Delay, Audit Report Lag, Financial Reporting, Auditor

JEL Classification: M41, M42